YUMA – In December, the City of Yuma sold US$71 million in utility system revenue bonds to finance upgrades to its sewer plant, increasing wastewater capacity at the Desert Dunes Reclamation Facility to 3.3 million gallons per day.
The City identified the facility expansion as a priority in the City’s adopted Strategic Plan, which enabled it to obtain a competitive interest rate of 2.26%.
“We are very pleased to see the community reach this milestone. This expansion represents the continued growth, investment and development of the city. Once completed, the treatment facility will be able to serve the future needs of the community,” said Utilities Director Jeremy McCall.
The city hired Stifel, Nicolaus & Company as underwriter to assist with the sale of the bond, which it has used to fund the City’s Public Safety Personnel Retirement System debt in January 2021.
It is important to mention that when companies and governments issue bonds, they receive a credit rating from the three major rating agencies, Standard & Poor’s, Moody’s and/or Fitch.
Last December, Yuma’s long-term rating was upgraded from A+ to AA- by Standard & Poor’s and affirmed at AA- by Fitch.
The bond rating upgrade reflects a positive view of the city’s finances, management and current debt, including solid population and GDP growth in Yuma’s economy.Also, moderate utility rates kept flat in fiscal years 2021 and 2022, as well as a history of strong debt service coverage and good liquidity helped earn the new ranking.
Priced in one of the last days before the winter vacations, the city’s bonds were well received and generated strong demand, resulting in lower interest rates during the bond sale process.
Mindful of the volatility of current interest rates, the city and its underwriter acted to secure a competitive interest rate of 2.26%, even though the city had anticipated a higher interest rate. Over a 20-year period, this lower interest rate represents an estimated present value savings of $462 thousand.
“This is a great job by city staff over the past year to manage finances and by the City Council to prioritize strategic investments during a low interest rate cycle,” explained Mayor Douglas Nicholls.
Source: MXICO-NOW Staff